OPEC realignment reflects oil supply reality
OPEC says $80 oil won't last due to `fundamentals'
Oil: A slippery (upward) slope

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OPEC and $80 oil

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Chris Skrebowski on record high oil price
(Audio)
Global Public Media
UK Petroleum Review editor Chris Skrebowski discusses today's $80 per barrel record high oil price with GPM's Julian Darley. Skrebowski also talks about his expectations for the rest of 2007.
(13 September 2007)


Oil Closes Above $80 a Barrel for First Time

Clifford Krauss, New York Times
Crude oil closed above $80 a barrel for the first time today, breaking a longstanding psychological barrier just days after oil producers tried to bring prices down by promising to increase output.

Traders and other energy experts warned that a recent jump in the price of crude would raise prices of heating oil and gasoline in coming weeks, though many were skeptical that oil would stay above $80 for long.

Crude prices normally drop at the end of the summer driving season. They are going the other way at the moment in part because traders fear stormy September weather in the Gulf of Mexico will disrupt production.

"This is a historic day," said Daniel Yergin, the energy historian and consultant. "This price reflects the fact that there is a lot of risk in the market, whether you are looking at Nigeria, or Iraq, or even in the Western Hemisphere."

Oil prices have jumped nearly fourfold since 2000 because of an array of factors: increased demand from China and India, declining production in Venezuela and Mexico, and supply disruptions from political crises in the Middle East and Africa and bad weather in the United States.
(13 September 2007)


Crude cruises to $80 a barrel
Commentary: Traders doubt OPEC's ability to boost output

MarketWatch
SAN FRANCISCO -- Crude-oil prices hit an all-time high Wednesday, topping $80 a barrel on the New York Mercantile Exchange and sending spasms through the marketplace.

Immediately, consumers smell higher prices at the pump. Retailers, already ailing from subprime fever, fear even weaker sales in the months ahead, economists fret over which metric to use to gauge the economic impact, and policy makers fear the fallout in the polls.

What is remarkable about this latest spike in oil prices is not the usual knee-jerk reaction, but the fact that it comes on the heels of the Organization of Petroleum Exporting Countries' pledge to raise output to take some of the heat off prices. See full story.

Energy traders aren't buying it.

It's not that OPEC is reluctant to raise production. With prices this high, discipline within the group's unruly ranks is not a concern. They were already pumping nearly a million barrels a day above their official quota.

No, the skepticism has more to do with production capacity -- or lack thereof.
The guys on the Nymex trading floor are questioning whether OPEC has the ability to lift output by another 500,000 barrels a day, the number they agreed on at their meeting Tuesday in Vienna.
(12 September 2007)


Bodman Says $80 a Barrel Oil Prices Are `Troublesome'

Tina Seeley, Bloomberg
Record crude oil prices above $80 a barrel are ``troublesome,'' U.S. Energy Secretary Samuel Bodman said today.

...Bodman praised the decision by OPEC to increase output.

``They have made a step, in my judgment, in the proper direction,'' he told reporters today after giving a speech in Washington.

He declined to say whether the increase was sufficient or whether more are needed from OPEC, which is responsible for 40 percent of the world's oil supplies.

Oil markets will still be vulnerable to supply disruptions even after the OPEC production hike, the Energy Information Administration, the statistical arm of the Energy Department, said today in a note.

``The market fundamentals, characterized by rising demand for OPEC oil and fairly low surplus capacity, should keep markets firm even with the planned increase in OPEC production,'' EIA said in its weekly report on petroleum.
(12 September 2007)


Forget about fundamentals, this is the oil market after all

John Heinzl, Globe & Mail
As oil prices surged to a record of more than $80 (U.S.) a barrel yesterday, analysts were asking just one question.

Why?

After all, the summer driving season is over. OPEC just opened the spigot for another 500,000 barrels a day. And, most important, the global economy is facing a credit crunch that's threatening to slow growth and cool energy demand.

These are hardly bullish fundamentals.

But try telling that to the hedge funds and other speculators who were piling into crude yesterday. On the New York Mercantile Exchange, crude oil for October delivery leaped $1.68, or 2.2 per cent, to settle at $79.91 a barrel, after touching an intraday record of $80.18.

Natural gas also rallied, surging 8.5 per cent for its biggest advance in seven months. Paced by oil and gas stocks, the S&P/TSX composite index rose 52.44 points to 13,756.72, even as the Dow Jones industrial average lost ground.

"I'm frankly a little surprised [crude oil] is this strong," said Bill O'Grady, chief global investment strategist with A.G. Edwards & Sons in St. Louis. "You can tick off the reasons it shouldn't be."

Part of crude's strength is good old-fashioned momentum. When an asset class starts moving higher, the lure of making a quick buck attracts more buyers, who push prices even higher, thus luring even more buyers.

And commodities such as crude oil make an attractive target for speculators, particularly now that the U.S. dollar is weakening and investors are looking to park their money in hard assets, which they can easily gain exposure to by buying commodity index funds.
(13 September 2007)


Shell CEO says "psychology" behind high oil prices

Reuters
Royal Dutch Shell Plc's (RDSa.L: Quote, Profile , Research) top executive said on Wednesday he sees no fundamental reason for crude oil prices to have jumped above $78 a barrel.

"No one has to wait at the gas pumps of the world. There is no physical problem," Shell Chief Executive Jeroen van der Veer told reporters in Calgary.

"(There is) a lot of psychology in the price," he said.

...Van der Veer said the price had risen above what the industry needs to sustain its operations. But he added that he expected more volatility in prices because of "the psychological component."

His comments echoed those made by the chief executive of Exxon Mobil Corp (XOM.N: Quote, Profile , Research) last week. Rex Tillerson told a Calgary business audience that $70 a barrel oil prices were not justified by market fundamentals.
(12 September 2007)


OPEC states' realignment reflects oil supply reality

Peg Mackey & Alex Lawler, Reuters
OPEC has published new oil supply targets for its 10 members bound by a pact to raise production, a move that reflects increases in production capacity in some countries and declines in others.

The Organization of the Petroleum Exporting Countries agreed on Sept. 11 to boost output by 500,000 barrels per day (bpd) on top of actual August pumping rates, effective Nov. 1. Angola and Iraq are outside the agreement.

Under OPEC's old quota system, changes in individual member states' limits would have been made on a pro-rata basis. But quotas in this form had long ceased to reflect the realities of OPEC states' ability to produce oil.

For instance Indonesia, an importer of oil, had a quota that far exceeded its capability.

"The quota system is in the past," an OPEC source said on Friday. "Everything now is based on actual production."
(14 September 2007)


OPEC Says $80 Oil Won't Last Due to `Fundamentals'

Fred Pals, Bloomberg
OPEC, whose members produce more than 40 percent of the world's oil, said crude at $80 a barrel won't last because ``fundamentals'' don't support the price.

``I don't think the price will stay at $80,'' Secretary General Abdalla el-Badri said today at a press conference in Vienna. ``The fundamentals don't support that.'' The price of $80 a barrel is ``too high,'' he added.

... El-Badri declined to comment on whether OPEC would discuss raising output again at its December meeting if crude prices remained near their current levels. ``Of course, we will discuss supply, demand and inventories, as usual,'' he said.

OPEC is not pursuing any specific price target or range, El- Badri said. ``It has been a long time ago since we've had a range,'' he said. OPEC having a specific target is ``rubbish.''
(14 September 2007)


Oil: A Slippery (Upward) Slope

Clark Williams-Derry, Sightline
I was wrong.

Chatting with some friends back in the summer of '05, when oil prices were flirting with $60 per barrel, I ventured a guess that oil would surpass $70 before it fell below $50. That is, I thought that oil prices would continue to rise in the short term.

I got that part right. Oil prices on the futures market briefly touched the $70s that fall, and reached the mid-$70s by the following spring.

But I also predicted that oil would fall to $40 per barrel before it reached $80 -- on the theory that, over the course of several years, rising oil prices would put a crimp in demand, while goosing production a bit.

That part I got dead wrong.

(Mind you, this was a personal prediction, not a professional one. Oil prices are notoriously difficult to forecast. Even the futures market -- which is a pretty good mechanism for aggregating informed guesses from people who have a real stake in getting the answer right -- has done a lousy job of predicting prices in recent years. So as a professional researcher, I'd never stake Sightline's reputation betting on oil prices. But as a private citizen & obsessive reader about peak oil theories, I thought that a short-term rise was pretty likely, but that pricesOil prices through 9/12/07 - 270w would likely be a roller- coaster ride over the next few years.)
(12 September 2007)

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